Govt proposes to exempt award given by Motor Accident Claims Tribunal from income tax: FM

Finance Minister Nirmala Sitharaman on Sunday proposed a tax exemption on awards given by the Motor Accident Claims Tribunal in the Union Budget 2026-27.

According to the Budget document, the provisions of the Motor Vehicles Act, 1988, inter alia, provide for compensation and an interest on the compensation to be awarded by the tribunal to an individual or his/her legal heir, on account of death or permanent disability or any bodily injury under the said Act.

“In order to alleviate the sufferings of victims of such an accident and their family, which may cause extreme hardship to the aggrieved person and family, it is proposed to amend the said Schedule to provide exemption to an individual or his legal heir, on any income in the nature of interest under the Motor Vehicles Act, 1988,” it said.

The document said these amendments will take effect from April 1, 2026, and shall accordingly apply in relation to the tax year 2026-27 and subsequent tax years.